China Banking Regulator Warns of Risks in 9 Sectors Including Property, Steel, PV03-25 11:58 Caijing
Chinese banking regulator has warned its financial institutions about major industries' exposure to excessive debts, high leverage and overcapacity, an official media said.
Risks of loans to Industries like property, engineering, steel, and PV, which are closely related to cyclical economic growth or have struggled to deal with overcapacity issue, are on high alert, according to a report by the China Securities Journal.
Citing an expert, the state-run newspaper said loans extended to property developers, corporate clusters and companies with excessive capacities could amount to 30 to 40 trillion yuan (about 4.8 -6.4 trillion), exerting wide-spread influence over the world's second-biggest economy.
Banks should also be cautious in lending to companies with rapid expansion and diversification, with complex structures, or with multiple borrowing and high leverage, the newspaper said, citing an order from the China Banking Regulator Commission.
Chinese banks have already tightened lending to those companies, as their branch offices are not allowed to extend loans to them any longer, said banking sources, as quoted by the newspaper.
For banks, the bottom line is to keep off any systemic and regional risks, a priority for banks, according to the CBRC. It also calls for a pre-warning system to hedge against potential risks in the banks.
China Development Bank, a policy lender, will control new loans to over-indebted PV industry players, where overcapacity has becoming increasingly prominent amid weakening global demand, Chen Yuan, head of the country's second-biggest bond issuer told reporters lately.
Banks have also curbed loans to the struggling steel makers, according to Xiao Gang, former Bank of China chairman and now chief of the china Securities Regulatory Commission.
Currently, risks in property and overcapacity sectors are still "controllable" as a whole, the fore-mentioned banking sources said. Mergers and restructuring that could emerge in the risky sectors will not weigh heavily on banks' credit, the newspaper said.
The CBRC also ordered a "purge" of risky wealth management products in banks, the report said. Major banks are required to look into their own WMP operations, and submit a report to the regulator before the end of June. Several cases of WMP defaults have stoked public concerns and triggered regulatory actions recently.
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